Cooling-Off Rule

Cooling-Off Rule

1. A rule of the SEC mandating that several days transpire between the filing of a new issue'sprospectus and the actual offering of the issue. This allows potential buyers and the seller to have a final chance to investigate the new issue and attempt to determine if there are any previously unforeseen problems. The cooling-off period is usually 20 days, but the SEC may change that for individual offerings at its discretion.

2. A clause in many contracts allowing the buyer of a good to return it to the seller in exchange for the amount paid for it for up to three days, without committing breach of contract. The cooling-off rule allows a buyer to restore the status quo before the contract was entered for any reason for a limited period of time. It is also known as buyer's remorse.

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